QSC AG

QSC AG
Company Presentation
Results Q3 2008
Cologne, November 19, 2008
1
19.11.2008
– Results Q3 2008 –
AGENDA
1. Operational Update
2. Financial Results / Outlook
2
– Results Q3 2008 –
HIGHLIGHTS Q3 2008: BACK TO PROFITABILITY
• QSC returns to profitability with € 2.1 million net income
• Ongoing strong and profitable revenue growth despite increasing
economic challenges
•
New business driven by
- QSC’s contribution to higher efficiency of customers
- Increasing number of ULLs
•
•
No material loss of existing business / customers
No noticeable change in payment defaults
• Implementation of synergies following the Broadnet merger
• Increased focus on cost discipline
=> QSC well positioned for economic downturn
3
– Results Q3 2008 –
ENCOURAGING FINANCIAL DEVELOPMENT IN Q3 2008
•
Revenues up by 25% to € 103.6 million
•
EBITDA up by 147% to € 18.3 million
•
EBITDA-margin doubles to 18%
•
Net profit of € 2.1 million (Q3 2007: € -4.7 million)
•
Significant reduction of CAPEX to € 21.1 million
(Q3 2007: € 34.5 million)
•
Well financed for anticipated growth
•
•
4
€ 49.4 million liquidity as of September 30, 2008
€ 36.7 million undrawn revolving credit facility available
Note: All results based on IFRS
– Results Q3 2008 –
PROFITABILITY THRESHOLD OF ~ 550,000 ULLs
REACHED IN OCTOBER
5
– Results Q3 2008 –
ADSL2+ WHOLESALE MAIN REVENUE DRIVER IN 2008
Revenue drivers
•
•
6
– Results Q3 2008 –
Continuing growth in ADSL2+
wholesale leads to higher revenue
share
Decline of traditional, minute-based
telephony revenues reflected in
Products
SUSTAINED GROWTH OF WHOLESALE BUSINESS
Break-up of revenues
•
•
50% of segment revenues from ADSL2+
11% from legacy voice
German Market 2008
•
•
•
3.2 million new DSL customers expected
Growing demand for unbundled lines
Substitution of T-DSL Resale by ULLs
(2.9 million on September 30, 2008)
QSC 2008
•
•
7
– Results Q3 2008 –
All major wholesale partners under contract
Profitable business with resellers i.e.
international carriers
- BT
- Colt Telecom
- Orange
- Verizon
GERMANY REMAINS A DSL COUNTRY
Prospective market development in the coming years
Main drivers for ADSL2+
+ Still growth in demand for DSL
+ Retail ISPs need access to
“complete” ULL vs. “bundled”
T-DSL wholesale lines
- Cable growth benefits
from “catch up” effect
following modernisation of
local / regional networks
+ 3.2MMe
8
– Results Q3 2008 –
SLOW DOWN OF REVENUE DECLINE
COUNTERED BY INCREASE OF VOIP/DIRECT ACCESS
Break-up of revenues
•
45% legacy voice (H1 2008: 50%)
Market 2008
• Slow down of price competition
• Rapid gain of market share of VoIP
QSC 2008
• Growing demand for direct access to
QSC’s network and VoIP products
• Positive development of DSL and
combined voice/data products for
corporates and SOHOs
• New product S.HDSL bis:
up to 20 Mbit/s symmetric
9
– Results Q3 2008 –
Market Trends & Potentials
VoIP
VOIP WILL BE A GROWTH DRIVER IN THE COMING YEARS
Main drivers
• Enterprises replace
separate data and
voice networks by
integrated IP networks
• Customers combine
VoIP with further IPbased services
• Efficiency gains
through migration from
legacy telephony to
VoIP based applications
10
– Results Q3 2008 –
QSC SELLS EFFICIENCY AND PRODUCTIVITY GAINS
TO ENTERPRISE CUSTOMERS
Market 2008
•
•
•
Integration of VoIP in IP-VPN solutions
Still growth opportunities in IP-VPN,
especially in the SME-Segment
High interest in new services like
Communication-as-a-Service targeting call
centers (Application Call Distribution)
QSC 2008
•
•
•
11
– Results Q3 2008 –
NGN ‘ready’ for the new services
Growing demand of Managed and Hosted
Services like VirtuOS ACD
QSC sells efficiency and productivity gains
QSC‘s BUSINESS MODEL:
MOVING UP THE VALUE CHAIN
12
– Results Q3 2008 –
SWIFT INTEGRATION OF BROADNET ACQUISITION
•
•
•
13
– Results Q3 2008 –
Network
- Overlap is eliminated
- QSC takes full advantage of Broadnet’s
WLL network
Sales and marketing
- All sales offices in Germany are merged
- Consolidated product range
Administration
- Headquarter functions are consolidated
in QSC’s headquarter in Cologne
IMPROVED COST DISCIPLINE
Main drivers
•
•
•
14
– Results Q3 2008 –
Improved cost discipline
Process improvements
Improved cost transparency
in each Business Unit
QSC WELL POSITIONED FOR 2009 AND BEYOND
•
QSC sells efficiency and productivity gains to enterprise customers
•
QSC is well financed and under leveraged
•
Growth in Wholesale / Reseller business
•
Growing demand for new managed services in niche markets
•
QSC – The NGN-Carrier => perfect starting position for the VoIP age
•
Growth opportunities plus cost discipline will allow further profitability
gains
15
– Results Q3 2008 –
AGENDA
1. Operational Update
2. Financial Results / Outlook
16
– Results Q3 2008 –
REVENUE GROWTH AND COST DISCIPLINE
LEAD RETURN TO PROFITABILITY
Q3 2007
Q3 2008
In € million
17
•
Revenues
83.2
103.6
+24.5%
•
Network expenses (1)
57.9
70.3
+21.4%
•
Gross profit
+25.3
+33.3
+31.6%
•
Other operating expenses (1)
17.9
15.0
-16.2%
•
EBITDA profit
+7.4
+18.3
+147.3%
•
Depreciation
12.7
15.7
+23.6%
•
EBIT profit / loss
-5.3
+2.6
nm
•
Financial results
-0.6
-0.4
-33.3%
•
Income taxes
-
-0.1
nm
•
Net profit / loss
-4.7
+2.1
nm
(1) Excluding depreciation and non-cash share-based payments
– Results Q3 2008 –
STRONG PROFITABILITY GROWTH Q-o-Q
Q2 2008
Q3 2008
100.2
103.6
+3.4%
69.3
70.3
+1.4%
+30.9
+33.3
+7.8%
16.7
15.0
-10.2%
In € million
18
•
Revenues
•
Network expenses (1)
•
Gross profit
•
Other operating expenses (1)
•
EBITDA profit
+14.2
+18.3
+28.9%
•
Depreciation
15.0
15.7
+4.7%
•
EBIT profit / loss
-0.8
+2.6
nm
•
Financial results
-0.6
-0.4
-33.3%
•
Income taxes
-0.1
-0.1
-
•
Net profit / loss
-1.5
+2.1
nm
(1) Excluding depreciation and non-cash share-based payments
– Results Q3 2008 –
EBITDA MARGIN REACHES 18 PERCENT
19
– Results Q3 2008 –
CUSTOMER GROWTH DRIVES CAPEX IN Q3 2008
Significant reduction of CAPEX
20
– Results Q3 2008 –
•
After finalisation of network rollout
in Q2 2008, CAPEX substantially
reduced by 39%
•
In Q3 2008, share of customerdriven CAPEX rose to 68%
(FY 2007: 44%)
90% OF CUSTOMER-DRIVEN CAPEX IS
INVOICED TO CUSTOMERS
Customer related CAPEX as
prepayment for future revenues
21
– Results Q3 2008 –
•
In 2008, ~90% of customer-driven
CAPEX is invoiced to customers
•
Average term of cash payment:
~60 days
•
Revenue recognition for upfront
customer payment is spread over
24 months / same period for
depreciation of CAPEX
STRONG IMPROVEMENT OF CASH / REVENUES RATIO
22
– Results Q3 2008 –
SIGNIFICANT REDUCTION OF INTEREST-BEARING
LIABILITIES / IMPROVED WORKING CAPITAL
Q2 2008
Q3 2008
+ Cash and short-term deposits
+49.2
+47.7
-1.5
+ Available-for-sale financial assets
+13.8
+1.7
-12.1
+ Liquidity
+63.0
+49.4
-13.6
- Finance lease obligations
-46.5
-42.2
-4.3
- Short- and long-term liabilities
-12.4
-10.6
-1.8
-3.0
-
-3.0
- Financial debt
-61.9
-52.8
-9.1
= Net liquidity (net debt)
+1.1
-3.4
-4.5
+ Trade receivables
+58.1
+60.5
+2.4
- Trade payables
-71.4
-62.9
+8.5
= Working capital
-13.3
-2.4
+10.9
In € million
- Liabilities due to banks
23
– Results Q3 2008 –
3.4 Debt financing – Club Deal
SOLID FINANCING
OF QSC:
€ 36.7 million undrawn revolving credit facility
(preliminary terms and
24
conditions)
Amount:
€ 50 million revolving credit facility
Banks:
Commerzbank (40%)
Sparkasse KölnBonn (30%)
DZ Bank (30%)
Term:
December 31, 2011
Interest rate:
EURIBOR +1.0-1.85% p.a. depending on EBITDA margin
Covenants:
Equity / Total assets (adjusted)
Net debt / EBITDA
EBITDA margin in %
As of 30/09/2008: € 36.7 million undrawn revolving credit facility available
QSC has drawn down € 0 in liquidity and € 13.3 million in guarantees
– Results Q3 2008 –
OUTLOOK 2008
QSC expressly reiterates its guidance
• QSC expects revenues of more than € 405 million
• QSC expects EBITDA of more than € 60 million
• Net income ~ € 0 million
25
– Results Q3 2008 –
FINANCIAL CALENDER 2008
December 4, 2008
5th Annual MidCap Forum
Exane BNP Paribas, Paris
26
– Results Q3 2008 –
CONTACT
QSC AG
Arne Thull
Investor Relations
Mathias-Brüggen-Strasse 55
50829 Cologne
Germany
Phone
Fax
E-mail
Web
+49-221-6698-724
+49-221-6698-009
invest@qsc.de
www.qsc.de
27
– Results Q3 2008 –
SAFE HARBOR STATEMENT
This presentation includes forward-looking statements as such term is defined in the U.S. Private
Securities Litigation Act of 1995. These forward-looking statements are based on management’s
current expectations and projections of future events and are subject to risks and uncertainties.
Many factors could cause actual results to vary materially from future results expressed or implied
by such forward-looking statements, including, but not limited to, changes in the competitive
environment, changes in the rate of development and expansion of the technical capabilities of
DSL technology, changes in prices of DSL technology and market share of our competitors,
changes in the rate of development and expansion of alternative broadband technologies and
changes in prices of such alternative broadband technologies, changes in government regulation,
legal precedents or court decisions relating, among other things, to line sharing, rent for colocation and unbundled local loops, the pricing and timely availability of leased lines, and other
matters that might have an effect on our business, the timely development of value-added
services, our ability to maintain and expand current marketing and distribution agreements and
enter into new marketing and distribution agreements, our ability to receive additional financing if
management planning targets are not met, the timely and complete payment of outstanding
receivables from our distribution partners and resellers of QSC services and products, as well as
the availability of sufficiently qualified employees.
A complete list of the risks, uncertainties and other factors facing us can be found in our public
reports and filings with the U.S. Securities and Exchange Commission.
28
– Results Q3 2008 –
DISCLAIMER
•
This document has been produced by QSC AG (the “Company”) and is furnished to
you solely for your information and may not be reproduced or redistributed, in whole or
in part, to any other person
•
No representation or warranty (express or implied) is made as to, and no reliance
should be placed on, the fairness, accuracy or completeness of the information
contained herein and, accordingly, none of the Company or any of its parent or
subsidiary undertakings or any of such person’s officers or employees accepts any
liability whatsoever arising directly or indirectly from the use of this document
•
The information contained in this document does not constitute or form a part of, and
should not be construed as, an offer of securities for sale or invitation to subscribe for
or purchase any securities and neither this document nor any information contained
herein shall form the basis of, or be relied on in connection with, any offer of securities
for sale or commitment whatsoever
29
– Results Q3 2008 –
APPENDIX
30
– Results Q3 2008 –
STABLE SHAREHOLDER STRUCTURE SINCE IPO
31
– Results Q3 2008 –
NETWORK ROLL-OUT IS COMPLETED
•
•
1,900 central offices under network coverage
Next Generation Network (NGN) up and running
•
•
•
•
Nationwide voice network (474 POIs)
Separate Wireless Local Loop (WLL) network
•
•
•
More than 90% of the traffic is IP-traffic
Significant cost-advantages
in 42 regions
up to 400 Mbps
Network breakeven achieved
•
QSC cross the threshold at some 550,000 ULLs
(10/2008)
32
– Results Q3 2008 –
ALL SEGMENTS WITH ATTRACTIVE MARGINS
33
– Results Q3 2008 –